This will be our second budget during pandemic. We are still going through unprecedented uncertainty. Indeed, this is an unusual time. And we cannot expect a normal budget at this moment. This ought to be 'out of the box.'
Disasters are great educators. We have a rich history of navigating through disasters. That's how, the nation acquired so much of fighting spirit to face disasters. We owe a great deal to our Father of the Nation who taught us how to fight disasters, natural or manmade, with our limited resources. He remained calm and used his creative political acumen in such circumstances. I hope, we have not forgotten how difficult the initial days of Bangladesh were when development pundits would trash it as a classic case of Malthusian paradigm. Thanks to the visionary leadership of Bangabandhu and entrepreneurial people of Bangladesh we have been able to transform a Bangladesh from 'ashes to prosperity'. In 1972, when Bangabandhu took the helm of the newly born war-torn Bangladesh, the major challenge he faced was recurrent natural disasters leading to food shortages along with diplomatic hurdles raised by the vanquished Pakistan. Bangabandhu, showing great governance dexterity, allocated nearly 11 per cent of the national budget to combat natural disasters between 1972 -1975. Despite the scarcity of resources, he allocated adequate funds to construct cyclone shelters and 'Killa's or 'fortress' which would be able to house vulnerable people and livestock during the event of a natural disaster. These 'killas' mostly located in southern part of Bangladesh later colloquially came to be known as 'Mujib Killas'. Besides, he also launched a programme to train a sizeable number of volunteers to respond to natural disasters thereby increasing their capabilities. Bangabandhu gave highest priority to save the lives and livelihoods of the people from the impact of natural disasters. In addition, his well-planned strategy to recover the ill-fated nation from the ravages of the war of 1971 has been well documented. He was deeply indigenous in his approach of sustainable recovery from all kinds of disaster. Investing in people was his number one strategy. We can certainly take a lot of Bangabandhu's creative options in facing today's calamities as well. The socio-economic fallouts of Covid-19 are even more challenging and we, therefore, ought to be more creative and entrepreneurial in facing this unprecedented disaster. The upcoming budget must be creative and unusual at this difficult phase of national and global crisis.
Fortunately, we as a nation have been enjoying the dividend of the legacy of compassionate leaderships. Our current Prime Minister Sheikh Hasina is treading on the footsteps of her father Bangabandhu Sheikh Mujibur Rahman during this challenging time and leading Bangladesh towards desired sustainable recovery. Her moves are similar and in the same direction despite many challenges. She announced stimulus packages of around 4.4 per cent of the Gross Domestic Product (GDP) when the first wave of coronavirus pandemic struck Bangladesh. Thanks to her well-planned incentivisation plans, policy makers were able to present and pass a national budget in National Parliament for the ongoing fiscal year which looked almost undoable initially. The budget was grounded to the realities of its time. In addition to providing greater allocation for the health sector, the budget proposals to continue investing in the mega projects of the government have already been bearing fruits in terms of sustaining employment and creating domestic demand for the local supply chains. The stimulus packages were designed mainly on expansionary monetary policy through expansion of the balance sheet of the central bank. However, this time we ought to depend more on the expansionary fiscal policy to continue our recovery journey from the challenges of the ongoing pandemic. The budget should also be able to address both the impending crisis in the health care sector alongside inducing the environment to create more jobs. I think our policymakers and implementers have earned valuable experiences in dealing with the fallouts of coronavirus pandemic during the past year. And this will be invaluable in designing the upcoming budget.
It may be noted here that Tk 100.00 billion was especially allocated for the health sector to combat the fallout of coronavirus pandemic during the ongoing fiscal year. A part of this fund has been utilised for buying vaccination and as well as for meeting other unforeseen health expenditures. I am sure that this year's budget will also have such a special allocation to tackle the pandemic, particularly for procuring millions of vaccines. The entire health sector deserves to be overhauled. At least, all the district hospitals need to be reequipped with central oxygen system, plenty of ICU beds and ventilators along with supportive human resource to treat corona patients. This has become even more imperative as many districts bordering India are witnessing unprecedented surge in infections. Moreover, to ensure that at least 60 per cent of the population is vaccinated by the next one year or even earlier, we need to allocate special funds for vaccine procurement programme at any cost, and if needed, forego some of the less prioritised fancy projects and get the money redirected to the health sector.
The pandemic has unveiled the Achilles' Heel of our health system and been calling for overhauling it urgently. Thus, we need to focus on healthcare sector in not only the upcoming budget but all the budgets under the Eighth Five Year Plan must reprioritise their expenditures keeping health at the centre of focus. If we look at the national budgets of the last ten years, it can be observed that around 5 per cent of the public expenditures has been allocated annually for the health sector. I think the share of healthcare sector in the national budget should be increased to 7- 8 per cent in the upcoming fiscal year. Additionally, we need to further increase the sectoral share of healthcare to around 10-12 per cent by the end of the Eighth Five Year Plan. However, only increasing the health- budget won't be enough. We also need to remain vigilant about prioritisation and the quality of the spending of health-budget. Usually, around 60 per cent of the budget for healthcare is allocated for the operational expenses. In order to overhaul the healthcare sector, the healthcare budget should be focused more on increasing the share of development expenditures. We also need to concentrate more on capacity building mechanisms for the healthcare sector to execute the additional development expenditures more efficiently. Historically, one fourth of the development expenditures of the health sector remained unutilised at the end of the fiscal year. Also, it has been observed that only 1.0 per cent of the healthcare budget is spent on medications procured by government hospitals. If that expenditure can be increased, it would improve access to medicine for the impoverished people. This will reduce their out of pocket health expenditure as well. We haven't seen many innovative initiatives in the healthcare sector in the recent years. We can allocate a special fund of Tk 1.0 billion for Research and Development (R&D) for the healthcare sector, particularly for generating more knowledge on both communicable and non-communicable diseases in the aftermath of the pandemic. Here, researchers from both the government and non-government research institutes can be mobilised to conduct such policy-focused researches. Moreover, we can also include startups and entities in this programme which will work to make healthcare more accessible digitally and create a better ecosystem of smart monitoring.
We need to save both lives and livelihoods. So, we need also to focus on how to create more opportunities for employment to provide livelihoods. I have already mentioned earlier that the decision to continue with the implementation of the mega projects despite the pandemic has been a smart move by the government. Implementation of these projects would create plenty of employment opportunities as the economy slowly recovers fighting the pandemic. If the government takes up a lot of infrastructural development work in both the urban and rural areas in the upcoming budget following Keynesian economic model, it will create a lot of employment as well. Implementation of these infrastructure projects will also create a better investment environment which will lead to an increase in foreign direct investment providing more employment to our people in addition to enhanced foreign exchange earnings. However, we should remain focused on expanding one stop services as being pursued by BIDA and BEZA to improve our indices of Ease of Doing Business. Also, we need to continue with the incentives packages for export-oriented industries along with Small and Medium Enterprises (SME) and cottage industries to address the existing employment related challenges created by the pandemic.
Coronavirus pandemic has also shown us that if we can't accelerate growth of the MSME sector soon enough, our unemployment challenge will continue to haunt us. It has been frustrating that incentive packages for SMEs announced by Prime Minister Sheikh Hasina couldn't be fully implemented. Only recently, it has started picking up pace. The bureaucratic hurdles and lack of confidence in the smaller entrepreneurs by the financial institutions created this mess. We need to be doubly cautious on this aspect in the upcoming fiscal year. Access to funds for MSME entrepreneurs should be ensured at any cost. Young entrepreneurs including women are taking up many business initiatives online. To flourish, they need more funding both from their families and the formal financial institutions. But unfortunately, they are not getting that support. The financial institutions need to be a bit bolder in terms of financing these start-ups. The central bank ought to be providing more moral suasion to the financial institutions to be more supportive to these new entrepreneurs. What happened to the Credit Guarantee Scheme? We don't hear much of their movements these days. Trapped in age-old bureaucratic complications? Either the government or Bangladesh Bank or both can think of creating a special startup fund of Tk 1.0 billion beyond the conventional ones that they have already been supporting. A new entrepreneur can get about Tk 0.1 million from this fund for about 10years with a grace period of two years with a nominal rate of interest. The instalments will be spread out for ten years so that they can feel no pressure of repayment. And this fund will be managed and monitored digitally. Thousands of sustainable entrepreneurs can be created in the process.
Agriculture has been the strongest safeguard for the economy during the pandemic. Thus, we need to continue to subsidise the agriculture sector in the upcoming budget as well. Recently Shaikh Siraj wrote in a daily newspaper that farmers are still cultivating paddy because fertilizers are subsidised. If that subsidy is removed and farmers move to farming high value crops, Bangladesh's food security will be endangered. He also prescribed that along with farming, more focus should be given to aquaculture, livestock and poultry industries. These sub-sectors suffer from a lack of proper financing and marketing support. Look at the fate of thousands of entrepreneurs from these sub-sectors in the coastal belt due to the recent disaster 'Yaas'. They need a special stimulus package just for their survival. The upcoming budget can allocate funds for such a disaster management package. Apart from this, it can be also ensured that along with government organisations, private entities should also come forward for supporting R&D in agriculture. For example, if private enterprises invest in a R&D projects in collaboration with Agricultural Universities, they can be allowed a tax exemption. Agricultural Insurance has been a long-held demand in the country. In the upcoming budget, at least a sizable pilot programme can be run under the Department of Agricultural Extension, not for all types of agricultural production but for a few that are more susceptible to disasters.
To enhance public expenditure, the government needs to increase its revenue collection. Despite the coronavirus induced economic slowdown, government's revenue collection in this fiscal year is still following an upward trajectory. This is certainly very encouraging. However, our Revenue-GDP ratio is still less than ten per cent which is the lowest in South Asia. We need to increase our tax coverage in the upcoming budget by skilling manpower and improving automation capabilities of the National Board of Revenue (NBR). The budget should commit about the desired reforms of NBR. Reforming the VAT and tax laws, making them digital and customer-friendly along with simplifying the processes will also have a positive impact on tax collection. But while trying to increase tax collection the businesses should not be harassed or burdened. This year, tax burden of the citizens and the business should not be increased. Our corporate tax has always been higher than most of our competitors. For that reason, the government reduced corporate tax by 2.5 per cent in the ongoing fiscal year. It is expected this will be further reduced in the upcoming year as well. Bringing in new taxpayers under the tax net will be the right way to help reduce the tax burden on the existing taxpayers. Fast resolution of 28000 pending cases for which Tk 410.00 billion has been stuck could be another boost to tax collection. For that matter, the number of tribunals should be increased and NBR be given the opportunity to hire its own panel lawyers as part of its capacity building.
Saving livelihood opportunities while saving lives should be the principal goal of the upcoming budget. Also, this budget should encourage expansionary monetary and fiscal policies with sharp focus on Covid response keeping in mind the long-term implication of the same on inflation.
Dr Atiur Rahman is the Bangabandhu Chair Professor of Dhaka University and former Governor of Bangladesh Bank.